Sawmills and Wood Preservation

Industry Profile Report

Dive Deep into the industry with a 25+ page industry report (pdf format) including the following chapters

Industry Overview Industry Structure, How Firms Opertate, Industry Trends, Credit Underwriting & Risks, and Industry Forecast.

Call Preparation Quarterly Insight, Call Prep Questions, Industry Terms, and Weblinks.

Financial Insights Working Capital, Capital Financing, Business Valuation, and Financial Benchmarks.

Industry Profile Excerpts

Industry Overview

The 2,700 sawmills and wood preservation companies in the US produce and treat a variety of wood products, including structural elements and dimension lumber. Major revenue categories include softwood lumber, hardwood lumber, preserved wood products, and wood chips. Sawmills may provide wood preservation services as a final step of production. Some large companies are vertically-integrated and own timberland or downstream operations, including divisions involving real estate ownership and residential construction.

Sensitivity To Economy And Construction Activity

Demand for wood products is highly dependent on the health of the construction and household furniture industries, both of which are sensitive to economic conditions.

Variable Timber Costs And Supply

The cost and supply of timber can be volatile, and affect margins and profitability for sawmills and wood preservation services providers.

Industry size & Structure

The average sawmill and wood preservation firm operates out of a single location, employs about 31-32 workers, and generates $11 million annually.

    • The sawmill and wood preservation industry consists of about 2,700 firms that employ 87,700 workers and generate $30.5 billion annually.
    • Sawmills account for 90% of firms and 78% of industry revenue.
    • The sawmill industry is fragmented; the top 50 companies account for 53% of industry revenue. The wood preservation industry is concentrated; the top 50 companies account for 85% of industry revenue.
    • Large companies with sawmill operations include Weyerhauser Company and PotlatchDeltic Corporation. Large companies that provide wood preservation services include Koppers Holdings, and Pacific Wood.
    • Some large companies are vertically-integrated and own timberland or downstream operations, including divisions involving real estate ownership and residential construction.
                                  Industry Forecast
                                  Sawmills and Wood Preservation Industry Growth
                                  Source: Vertical IQ and Inforum

                                  Coronavirus Update

                                  Apr 22, 2022 - Ukraine War Further Disrupts Global Lumber Markets
                                  • Russia’s invasion of Ukraine is disrupting global wood product trade flows, especially in Europe. According to Wood Resources International, Russia, Belarus, and Ukraine exported 34 million tons of lumber in 2021, and 25% of that volume was exported to countries that have sanctioned Russia and Belarus. Europe’s timber imports from Russia and Belarus accounted for nearly 10% of the continent’s consumption in 2021. Wood certification organizations Forest Stewardship Council (FSC) and Programme for the Endorsement of Forest Certification (PEFC) have designated all timber from Russia and Belarus “conflict timber,” which cannot be used to manufacture certified products, including lumber and plywood. Even after peace returns to Europe, timber trade flows have likely been permanently altered.
                                  • Residential construction will decrease in 2022, but private non-residential construction is set to rebound as economic reopening drives the need for remodeling and rebuilding, according to multinational banking and financial services corporation ING. Government infrastructure investment will add an extra layer of spending that can mitigate the headwinds from housing and leave overall spending down 0.5% in 2022 after 2021's 7% increase.
                                  • Even before Russia invaded Ukraine, lumber markets were highly volatile. Lumber traded at $938 per thousand board feet on April 19, down from the record high of $1,686 per thousand board feet on May 7, 2021, but up from $454 per thousand board feet on September 15. Lumber prices have oscillated widely during the coronavirus pandemic, falling from the mid-$400s in January 2020 to $264 in late April before surging to $948 in September. The price then dropped to $495 in late October 2020 before starting a fairly steady climb to the record set on May 7, 2021.
                                  • Total construction spending increased 0.5% in value month over month on an adjusted basis in February 2022, according to the US Census Bureau. Total unadjusted construction spending rose 10.4% in the first two months of 2022 compared to the same period in 2021. Residential construction spending increased 1.1% month over month in February and was up 15.5% for the first two months of 2022. Nonresidential construction spending decreased 0.1% month over month but increased 5.8% in the first two months of the year compared to the same period a year earlier.
                                  • Sawmills may eventually have difficulty securing input products because the coronavirus outbreak is limiting the number of trees being planted. Tree plantings are declining due to fewer housing starts and pandemic-related migrant labor restrictions. “The effects will be delayed for the forest products industries,” said Matthew Pelkki, economist for the University of Arkansas System Division of Agriculture. “And since demand for wood is derived from manufactured products, the recovery will be slower, particularly for landowners who will likely see very weak stumpage markets in 2021 and 2022.”
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